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Ordinance for e-auction of coal blocks

The e-auction of coal blocks for private companies got the nod from President Pranab Mukherjee on 21 October 2014, who promulgated an ordinance cleared by the Union Cabinet in the backdrop of the Supreme Court order that quashed the allocation of 214 coal blocks to companies since 1993.

The move, seen as a step towards energy sector reforms, will allow private companies to bid for captive use and allot mines directly to State and Central public sector undertakings.

Following this ordinance, State sector requirements, including those of the Central and State governments, would be met through government dispensation route and coal mines would be allocated to PSUs like NTPC or State electricity boards.

The government will put sufficient coal blocks on e-auction for the private sector players who are into the cement, steel and power sectors.

The proceeds will go entirely to the State governments where the mines are located.

The biggest beneficiaries would be the eastern States of Jharkhand, Odisha, West Bengal and Chhattisgarh. Madhya Pradesh, Maharashtra and Andhra Pradesh would also benefit.

All companies, except those convicted by courts, will be allowed to participate in the auction and there will be no right of first refusal and all bidders will have to compete in the e-auction through reverse bidding.

The coal blocks, which were earlier allocated through a screening committee mechanism, became a political issue after the Comptroller and Auditor General (CAG) alleged arbitrariness and absence of any criteria in the screening process and pegged notional loss to the exchequer at Rs 1.86 lakh crore. The Supreme Court quashed allocation of 214 out of 218 coal blocks allotted to various companies since 1993, terming the method as “fatally flawed”.